Educational Articles

Housing Starts

Harvey S. Katz, CFA

At the midpoint of each month, the U.S. Census Bureau and the Department of Housing and Urban Development jointly announce residential construction statistics for the prior month. The report includes figures on housing starts, building permits, and housing completions. It is one of the more closely watched surveys issued monthly, as housing is seen as critical to sustaining any economic expansion.

The break down is as follows:

Housing Starts: This category includes housing units that have been started and those under construction. The start of construction is when excavation begins for the footings or the foundation of a building. The aggregate number of housing starts--which includes privately owned units only, and not public units--is issued, monthly, along with revised data for the prior month. The figures are further broken down into single-family and multi-family units (with the latter, which is regarded as a more volatile number, consisting of buildings with five or more units). The breakdown is also by region, with the Northeast, the Midwest, the South, and the West all summarized by percentage change. Importantly, the monthly figures are all given on an annualized basis to smooth out the seasonal vagaries. Also provided are inventory figures, which are measured in months.

Building Permits: This number is considered a leading indicator for the homebuilding sector, as housing starts often correlate to it. This category also includes data for single-family units and multi-family units. Statistics on housing units authorized by building or zoning permit, but not yet started, represent the areas of the country that require such permits. Some areas do not.

Housing Completions: Here, as well, we get a full breakdown with single-family and multi-unit figures included. Housing completions are defined as such when all finished flooring has been installed. If the building is occupied before all construction is finished, it is classified as completed at the time of occupancy.